Mistrial declared in Quattrone case

LuisaBeltran

NEW YORK (CBS.MW) -- A federal judge declared a mistrial Friday in the case against former Credit Suisse First Boston investment banker Frank Quattrone after the 11 jurors deliberating his fate failed to reach a verdict.

Shortly after noon Friday, the jury sent Judge Richard Owen its last note saying it was unable to reach a decision on any of the three charges against Quattrone. At 12:35 p.m., the panel came back to the courtroom and Owen asked attorneys for both sides if they had any objections to a mistrial.

Assistant U.S. Attorney Stephen Peikin and lead defense attorney John Keker both said they had no objections.

"I take it that this note is, in effect, a statement with no equivocation at this point?" Owen asked the jury. "Am I correct in that from all of you, that you see no point in any deliberations further?"

At this point one juror raised his hand and said he thought the case needed more deliberations. Owen then huddled with the attorneys in a sidebar and discussed the case.

"Ladies and gentlemen, other than the one gentleman of your number who I am sure sincerely states his feelings in this thing, does anybody else have a feeling that further deliberation would have any possibility of bearing fruit?" Owen said to the 11 jurors, according to court transcripts.

When the panel remained silent, and no one raised a hand, Owen stated: "Under all circumstances, it is appropriate and that I'm obliged to grant a mistrial at this point; and, therefore, I do," he said. "I grant a mistrial in this particular trial."

Quattrone did not visibly display any emotion. But his family, seated in the first row, hugged some of the defense attorneys and patted their backs as they left the defense table.

Later, in a brief press conference held across the street from the Manhattan federal courthouse, Keker made a short statement. "We are appreciative that the jury worked very hard here," he said. "We are disappointed. Frank is innocent."

One more time?

Earlier in the week, the government indicated that it plans to retry Quattrone. However, a spokesman for the Justice Department said it is undecided whether the government will seek a second trial.

The two sides will next meet Nov. 5 at 10 a.m. for a scheduling conference to decide the future of the case.

"This is definitely a major blow to the government's prosecution of white collar criminal cases," said securities attorney Robert Heim, of Meyers & Heim. "I think at this point the government will drop the charges. It's a risky bet if they lose a second time."

But David Marder, of law firm Robins Kaplan Miller & Ciresi, thinks the government will attempt another trial. "Securities fraud has really been in the spotlight lately," Marder said. "The prosecutors would be perceived light on crime if they didn't try for him a second time."

The government generally seeks to retry cases unless a plea is worked out between the parties, said attorney Robert Mintz, of McCarter & English.

Attorneys for Quattrone declined to comment on the possibility of settlement talks.

The mistrial also could be encouraging for Martha Stewart, the former head of Martha Stewart Living Omnimedia
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Stewart is charged with obstruction of justice, conspiracy, lying to prosecutors and securities fraud for her sale of ImClone Systems
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shares in December 2001. She allegedly received insider information that caused her to sell her shares of ImClone before damaging news about the company's cancer drug application was made public.

"Martha Stewart will be emboldened by this," Marder said. "Even though it's been a bit of a witch hunt against securities violators, the message here is that you can still get a fair trial."

"This gives Martha Stewart a lot of hope that she will have a chance at prevailing before the jury," added Heim, of Meyers & Heim. "This shows the government won't have a slam dunk in a high profile case."

Quattrone, 48, who came to symbolize the excess of the late 1990s stock market bubble, was charged with trying to thwart a government investigation.

The former star banker faced separate counts of obstruction for trying to block a Securities and Exchange Commission and grand jury investigations. He was also charged with witness-tampering.

The jury reaction

Later Friday, one juror, Mayo Villalona, spoke to the press on the courthouse steps. Villalona, 26, who is employed by the British bank HSBC, said the jury began Friday with five jurors voting guilty and six voting not guilty. But then some changed their minds and the jury ended up with eight voting guilty for obstructing a grand jury investigation and for witness tampering. For attempting to thwart a SEC probe, only five jurors thought Quattrone was guilty, he said.

Villalona, who said he voted not guilty on all counts and never changed his stance, said the government's case lacked evidence. The government needed proof such as "something that says 'I did destroy this' or a conversation between Quattrone and someone else," Villalona said.

However, the defense was weakened when Quattrone took the stand. "If he had not gone up there, Quattrone would've been not guilty on the spot," Villalona said.

Quattrone testified in his own defense at the trial, which began Sept. 29. Throughout questioning, he maintained that he had little or no involvement in the IPO allocation process. Instead, he claimed that the equities division of CSFB had responsibility for the decision-making on IPO shares.

But on cross-examination, the government surprised Quattrone and his defense team by introducing several e-mails showing that the banker was intimately involved in the allocation of IPOs.

One e-mail, to Michael Dell, chief executive of personal-computer giant Dell
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had Quattrone checking on Dell's interest in having Dell Ventures receive a "meaningful allocation of the IPO of Corvis." See full story.

More notes

In all, the jury sent Judge Owen three notes saying it was deadlocked in discussions. Earlier this week, the 81-year old Owen read to the jurors the so-called Allen charge, which is meant to shake up stalemated juries and urge them to reconsider their positions.

On Friday morning, Owen beseeched the jurors to reach a verdict despite the protestation that they were deadlocked.

Keker made several requests for a mistrial this week based on the jury's notes and a delay in deliberations. Deliberations were suspended for two days, and did not begin until Wednesday because one juror's pregnant wife went into labor. Despite the delay, Owen rejected two of Keker's motions for a mistrial but reserved his decision on the last request, according to transcripts.

The case against Quattrone

At issue in the trial were Quattrone's actions from May to December 2000, when he held dual responsibilities at CSFB for overseeing analysts as well as heading technology banking, two normally separate posts.

In 2000, CSFB was facing probes from the Securities and Exchange Commission, the NASD and a federal grand jury. All were investigating the investment bank for allegedly accepting kickbacks from hedge funds in exchange for shares in hot IPOs.

CSFB, the investment banking unit of Credit Suisse Group
CSR, -8.86%
ultimately paid $100 million to settle charges arising from the investigation, without admitting or denying guilt.

Quattrone was told at various times throughout the latter half of 2000 that CSFB was the subject of a federal investigation. On Dec. 5, 2000, Quattrone sent an e-mail to employees encouraging them to "clean up" their files.

The act led at least one CSFB employee to destroy documents.

CSFB's document retention policy requires employees to discard unnecessary files except in cases of a subpoena or lawsuit, when records are to be kept. At the time Quattrone issued his message, a federal grand jury and the SEC had served CSFB with a subpoena.

Quattrone, who joined CSFB in 1998, resigned last spring.

Under his tenure, the Swiss banking unit underwrote or was involved in some 300 IPOs, including the dazzling first day performance of VA Linux, which priced at $30 a share but soared to $300. Quattrone's group, tech investment banking, worked on 100 new issues.

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